Women, Retirement, and the Growing Gig Economy Workforce

• Publication year: 2022

Women, Retirement, and the Growing Gig Economy Workforce

Caroline Bruckner
American University Kogod School of Business, cbruck@american.edu

Jonathan B. Forman
University of Oklahoma, jforman@ou.edu

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WOMEN, RETIREMENT, AND THE GROWING GIG ECONOMY WORKFORCE^*

Caroline Lewis Bruckner^** & Jonathan Barry Forman^***

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Abstract

Gig work—the selling or renting of labor, effort, skills, and time outside of traditional employment—is a long-standing feature of the U.S. economy. Today, millions of "online gig workers" sell goods and services, or rent rooms, houses, vehicles, and other assets using app-online and app-based platforms (for example, Uber, Lyft, Rover, DoorDash, eBay, Etsy, Postmates, VRBO, and Airbnb) to connect with customers. Millions more of "offline gig workers" run errands; walk dogs; care for children and the elderly; do housework, yardwork, and other occasional jobs; rent rooms; and sell goods at outdoor markets and roadside stands—without using online platforms to connect with their customers. This Article focuses on gig work in terms of what it means for women, their work, and their retirement income security. In particular, this Article (1) reviews the existing measures of gig work to determine any relevant data gaps; (2) summarizes the tax and retirement rules for gig workers; (3) considers the major factors that contribute to the gender retirement wealth gap; (4) identifies the challenges for gig workers in saving for retirement, including the extraordinary economic circumstances presented by the COVID-19 pandemic; and (5) discusses some federal tax, retirement, and financial literacy policy proposals that could help gig workers better support themselves in retirement.

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CONTENTS

Abstract................................................................................260

Introduction.........................................................................264

I. The Gig Economy Workforce........................................268

A. Traditional and Nontraditional Work Generally.......270
B. Other Approaches for Measuring Gig Work.............275

1. The U.S. Department of Treasury and the Internal Revenue Service....................................................275
2. The Federal Reserve System.................................283
3. U.S. Census Bureau..............................................287
4. The U.S. Small Business Administration..............289
5. The JPMorgan Chase Institute.............................289
6. MBO Partners......................................................291
7. The ADP Research Institute.................................292
8. Upwork.................................................................293
9. Other Estimates....................................................294

C. More Detail on Gig Worker Demographics 296

1. Gender and the Gig Economy .............................. 296
2. Older Workers......................................................299

II. An Overview of the Federal Tax System...................302

A. The Federal Income Tax............................................303
B. Payroll and Self-Employment Taxes..........................305
C. Tax Payment and Reporting Rules............................307

1. Employees.............................................................307
2. Self-employed Workers ......................................... 308
3. Sellers and Renters of Property............................313

D. Tax Compliance and Gig Workers ............................ 315

III. An Overview of the U.S. Retirement System............321

A. Social Security ........................................................... 321

1. Social Security Benefits........................................322
2. The Adequacy of Social Security Benefits............325

B. Pensions and IRAs, Generally...................................330

1. Employer-Sponsored Pension Plans .................... 331

a. Defined Benefit Plans ..................................... 331
b. Defined Contribution Plans............................ 332

3. Other Tax Incentives to Promote Retirement Savings ..............................................................................333
2. IRAs ......................................................................333

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4. Retirement Plans Targeted to Small Businesses and the Self-Employed ................................................. 334

a. IRAs ................................................................ 334
b. Simplified Employee Pensions (SEPs)............335
c. SIMPLE IRA and SIMPLE 401(k) Plans........335
d. Qualified Plans...............................................336

5. The Tax Expenditures for Retirement Income Security ................................................................. 337
6. Pension Coverage and Participation ................... 338

a. Pension and Coverage....................................338
b. Adequacy........................................................341
c. Some Demographic Considerations ............... 342

C. Individual Savings.....................................................346

IV. A Closer Look at Women, Work, and Retirement Savings............................................................................346

A. Women and Work.......................................................349
B. Women and Caregiving.............................................. 352
C. Women and Life Expectancy ...................................... 355
D. Women and Health Care Costs.................................355
E. Women and Retirement Income Security .......356

1. Women Depend More on Social Security Benefits ..............................................................................356
2. Women Are Less Likely to Participate in Employer-Sponsored Retirement Plans ................................ 356
3. Women Often Have Less Savings and More Debt 358
4. Women Often Have Lower Financial Literacy..... 359

V. Problems Ahead for Gig Workers Working to Save for Retirement..............................................................360

A. Misclassification Means that Gig Workers Do Not Always Earn Enough Social Security Benefits ........ 362

1. The Importance of Classification.........................363
2. The Internal Revenue Service Test ....................... 364
3. U.S. Department of Labor Test............................365
4. National Labor Relations Board .......................... 367
5. State Efforts .......................................................... 367

B. Gig Workers Often Do Not Have Pensions or IRAs ..369
C. The Impact of COVID-19...........................................372

VI. Policy Options...............................................................377

A. Prioritize Gig Worker Data and Research ................ 378
B. Tax Reforms ............................................................... 381

1. Information Reporting Analysis ........................... 381

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2. Promote Withholding on Payments to Self-Employed Workers................................................................383
3. Gig Worker Standard Business Deduction...........384
4. Make Permanent the Removal of the Age Sixty-Five Limit on the Eligibility of Older Americans for the Earned Income Tax Credit...................................384
5. Make the Saver's Tax Credit Refundable.............385

C. Social Security and Supplement Security Income (SSI) Reforms.......................................................................385

1. Update the Supplemental Security Income (SSI) Program................................................................386
2. Improve Social Security for Women.....................386

D. Pension and IRA Reforms..........................................387

1. Expand Coverage and Improve Portability..........388
2. Improve Spousal Benefits in Pensions and IRAs .. 389

E. Worker Classification Reforms..................................390
F. Financial Literacy......................................................392
G. Establish a Federal Benefits and Retirement Commission................................................................394
H. Make Worker Benefits More Portable.......................394

Conclusion............................................................................398

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Introduction

Gig work—the occasional selling of labor, effort, skills, and time—is a long-standing feature of the U.S. economy. The term's use to describe occasional paid work originated in the 1920s from the slang that American jazz musicians coined to describe their paid engagements (especially their one-night gigs).¹ Commonly understood to be informal, contingent work arrangements (as opposed to traditional employment), some types of gig work have become more automated and accessible alongside the widespread adoption of internet-enabled smart phones in the early twenty-first century.² Today, millions of "online gig workers" sell goods and services, or rent rooms, houses, vehicles, and other assets using app-online and app-based platforms (like Uber, Lyft, Rover, DoorDash, eBay, Etsy, Postmates, VRBO, and Airbnb) to (1) connect with customers and (2) process customer payments.³ Millions more of "offline gig workers" run errands; walk dogs; care for children and the elderly; do housework, yardwork, and other occasional jobs; rent rooms; and sell goods at outdoor markets and roadside stands—without using online platforms to connect with their customers.⁴

Although working outside of traditional employment (in other words, a full-time job with employee benefits and tax withholding) has long been a source of supplemental income for some workers, the rise of online platforms has generated a new emphasis on these alternative work arrangements by government and academic researchers looking

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at tax compliance, worker protection, and benefits policy.⁵ Unlike traditional employees, most workers engaged in gig work...